Covid-19 in numbers
By Roy Clinton
As the global Covid-19 death toll exceeds a million lives, each day we naturally keep a wary eye on the daily reported local Covid-19 cases and the overall trend. That however is not the only number that we need to keep an eye on. We also need to look at the numbers that tell us the financial cost of Covid-19 and the overall health of our public finances.
The Government estimate in the appropriation bill approved last month is that by March 31, 2021, the direct and indirect cost, in loss of revenue, of Covid-19 to our public finances will be £150 million.
To put that number in context, it is the equivalent of the combined capital cost of all our new schools and sporting facilities.
This money is not coming from reserves but from new borrowing that will push our official direct debt numbers to new record highs.
It must be remembered that this money is not an investment that will be recovered, but it will be spent in meeting Covid costs and compensating for lost Government revenues.
Given the real public interest in how this money is being spent, we have worked with the Government to ensure that full transparency is provided and published in the Gazette on a quarterly basis. The first such report on the Covid-19 Response Fund for the period ended June 30, 2020, was discussed in Parliament last month and made public.
With a further nine months still to run to March 31, 2021, the cost is already at £81.8 million ,represented by £58.8 of lost public revenue and £23 million of direct costs. This is already more than 50% of the total estimated cost of £150 million with only a quarter of the period expired.
It is true of course that some costs had to be front loaded such as GHA costs of £9.4 million and the BEAT 1.0 measures of £11.3 million. It may be easier to control future costs as the scale and effect of the pandemic becomes clearer in Gibraltar.
Additional business support measures such as BEAT 2.0 and the recently announced BEAT 3.0 are not yet included in these numbers.
The one number that is out of Government’s control is the loss of revenue, which to 30 June 2020 amounted to £58.8 million, with the largest loss being in Import Duties of £33.3 million and Income Tax of £10 million.
These both are directly related to the health of the economy and employment although in the latter case the loss of income tax was partly attributable to the BEAT 1.0 measures in which payments were made free of Income Tax.
It costs more than £50 million a month to sustain our public services and so a loss of revenue of £58.8 million combined with increased direct Covid-19 costs is a squeeze that our public finances cannot sustain for long.
In this respect as an Opposition we have been supportive of immediate Government measures to deal with the direct effects of the Covid-19 crisis in respect of the health of both the public and our economy.
We have supported both the emergency budget in March 2020 and the further appropriation in September 2020, given the urgency and need for expediency and the fact that Government agreed to and worked with us in ensuring full transparency in how it was utilising monies in the Covid-19 Response Fund.
However, our concerns as to the wider public finance debate remain given that we still do not know how monies are spent through Government owned companies nor the total of direct and indirect debt.
Well before the Covid crisis we estimated that the total gross amount of direct and indirect debt of Gibraltar was in the region of £1.3 billion which includes the mortgaging of our housing estates for £300 million. Covid will make that debt level much worse.
We are increasingly sceptical about the Government embarking on unnecessary beautification projects and employing consultants on the Line Wall Road scheme, which frankly should be shelved for better times if not just abandoned as a bad idea. Now is not the time for party-political gimmicks when we look at the numbers. Now is the time for a reality check on what the future holds and what needs to be done now. Money should only be spent on essential projects and services and those services need to be maintained with full public access.
Sir Joe Bossano, during the debate on the appropriation bill last month, made it clear that Government was borrowing to fund recurrent expenditure, a move contrary to one of his Golden Rules but necessary to deal with Covid-19.
He also starkly mentioned that he believed that Government revenues of £706.6 million may have reached a high watermark point in 2019 and that that level may not be seen again for years to come. The views of the Minister for Inwards Investment carry weight, although his National Economic Plan as the cure for all Brexit ills still fails to convince us.
The reality is that we face uncertain times in the effects of Covid-19 and of course Brexit, but one thing we cannot take our eye off are the financial numbers and key indicators of the health and pulse of our public finances.
We need to watch the numbers for public borrowing, revenue, expenditure and the Covid-19 Response Fund as these will shape our future. The Government needs to publish less pretty pictures of cycle lanes and parkland and instead ensure the numbers stack up.
Roy Clinton is a GSD MP and shadow minister for public finance